Canada vs Prévost Car Inc, April 2008, Tax Court of Canada, Case No 2008 TCC 231

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Prévost is a resident Canadian corporation who declared and paid dividends to its shareholder Prévost Holding B.V. (“PHB.V.”), a corporation resident in the Netherlands. When Prévost paid the dividends it withheld five percent in tax.

The tax authorities issued an assessments against Prévost in respect of the aforementioned dividends. The tax authorities assessed on the basis that the beneficial owners of the dividends were the corporate shareholders of PHB.V., a resident of the United Kingdom and a resident of Sweden, and not PHB.V. itself.

An appeal was filed with the tax court by the company.

… one does not pierce the corporate veil unless the corporation is a conduit for another person and has absolutely no discretion as to the use or application of funds put through it as conduit, or has agreed to act on someone else’s behalf pursuant to that person’s instructions without any right to do other than what that person instructs it, for example, a stockbroker who is the registered owner of the share it holds for clients.

Judgement of the Court

The tax court rejected the tax authority’s arguments for beneficial ownership, and allowed the appeal.

“Volvo and Henlys were not the beneficial owners of the dividends paid by Prévost. I have not heard any evidence satisfying me that PHB.V. was a conduit for Volvo and Henlys. The appeals are allowed, with costs…”


Canada vs PREVOST CAR INC 2008tcc231

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